Postage Prices Not Set to Increase Again in 2011

UPDATE: As of September 30, 2010, the postage increase is on hold. Regulators have denied the request for a rate hike so postage prices will not be increasing in 2011 as originally planned. This doesn’t mean a rate hike isn’t in our future, but it won’t happen as soon as originally anticipated.

The remainder of this post is the original from July when the rate hike was first anticipated.

Does it seem like the cost of a postage stamp just went up? That’s because it did: Last year, the Postal Service last increased the price of a first-class stamp to 44 cents, up from 42 cents in 2009. Yesterday the Postal Service met to discuss a new rate increase and they have agreed that it’s time to increase rates once again. Technically, the law prohibits a price increase that’s greater than the rate of inflation, which for the last year has been 0.9 percent. But under “unusual circumstances,” the Postal Service can sidestep the law and increase postage rates by more, which is what they plan on doing.

Why is the post office increasing rates greater than the rate of inflation? “The Postal Service faces a serious risk of financial insolvency,” postal vice president Stephen M. Kearney said. The post office lost $3.8 billion last year, despite cutting 40,000 full-time positions and making other reductions, and Kearney said it is facing a $7 billion loss for this year and the same for fiscal 2011, which begins in October. The rate increase would bring in $2.5 billion, meaning there still would be a large loss for next year.

How Much and When Rates Will Increase

The most noticeable increase will be the first-class stamp with another 2 cent increase to 46 cents. That’s about a 5% increase. While your average letter will be going up a few cents, everything else is increasing as well. Priority mail, express mail, addtional first class postage, media mail, and so on. Across the board, most services will see about a 5% increase. One noticeable increase comes to the mailing of periodicals. Those mailings are slated to see a whopping 8% increase. The new rates still need to be approved, but with almost certainty they will be, and then the new rates will take effect on January 2, 2011.

How This Will Affect You

I know what you’re thinking. You don’t send letters and use email instead, you pay all of your bills online, and the increase won’t really matter to you. It’s true that an extra two cents for a stamp isn’t going to break the bank for most people who only mail a handful of items a year, but these postage increases don’t stop there and even if you don’t mail anything these days you may still feel the pinch.

Think about the companies that rely on the postal service to ship their products to consumers. What does a 5% increase in postage mean to a company that already spends tens of millions of dollars a year on postage? Amazon, anyone? An even bigger player has to be Netflix. Their core business model resolves around sending you movies in the mail. In fact, media mail, which Netflix mailings fall under, is slated to get a 7% increase. This would end up costing Netflix upwards of $50 million more on shipping costs in 2011. That’s on top of the already hundreds of millions being spent on shipping.

So, while you may not fret over the two extra pennies you need to stick on an envelope, don’t expect companies who rely on the post office for shipping to just eat the cost. Instead, it will likely get passed down to you in some form or another.

The Forever Stamp

Finally, the one bright spot is that forever stamps are still being sold and that means you can still effectively lock in the lower first class postage rates. A lot of people ask whether or not the forever stamp is a good investment. Well, considering you can essentially get a 5% return on your money in a year, yes, on paper it’s a good investment. But you have to look at how much you really stand to make. For example, if you use 50 stamps a year, the 2 cent savings is one dollar a year. It’s still about a 5% return on your investment, but in the end it’s still only a dollar. So, you have to ask yourself whether or not it’s worth it to stock up on forever stamps just to save what could be a matter of a dollar or two in the coming few years.

In my opinion, it’s a good idea to buy a healthy supply that will last a year or so, but I’m more concerned about the savings I see by not having to go to the post office as frequently. As far as I’m concerned, the amount of time I save by not having to go into a post office is priceless. I don’t really care about saving a few cents on postage, but I do care about not wasting a half hour of my time standing in line at an understaffed post office.

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

After reading John's testimonial, I would like to state that no business can make long-term profits if it does not offer a great customer service experience. You need to treat customers the way they deserve to be treated; the future of a business depends on them. It is not wise to focus on making tons of money exclusively. You will feel the repercussions, sooner or later.

I am really glad to be out of the post office. I worked for them for 15 years and saw a greedy decline in service.When I resigned, I had been promoted to Postmaster.When my manager of postal operations in Portland, Oregon informed me that he wanted me to give less in the way of customer service and concentrate more on just making more money I told him where he could put his job and I resigned.I had already increased revenue more than 33% over the previous year because I offered customer service.the problem with the post office is the fact they pay way too much for the employees. I was making over $26.00 per hour, I am actually more happier now making $14.00 per hour in my new job. I still get to provide excellent customer service.I say cut the employees pay by at least 40% and you will see a dramatic change in postal revenue.

This article misses an important point: additional ounces were not going to increase in price under the proposed raise -- they'd still be 17 cents Amazon uses mostly additional ounces...they don't send out one-ounce mailings normally.

Oh boohoo.... where else can you slap 42 cents on a piece of mail and it will go halfway around the world (New York to Hawaii, for instance). So you may have to pay an increase in some other prices, which when spread across the entire US population would be such a miniscule impact on you, you'd probably never notice. From an inflation point of view, the US postage stamp is a bargain, especially considering the stamp has only gone up from $0.06 cents to its current rate.http://en.wikipedia.org/wiki/History_of_United_States_postage_rates

We usually try to buy the forever stamps instead of the ones with a particular price on them, especially because we use so few of them that we would end up having to go to the post office to buy 2 cent stamps to cover the difference when they, increasingly often, raise postage. The only time we use a lot of stamps is at Christmastime to send out greeting cards.

When I saw this post I immediately thought, "Oh well that doesn't affect me because I pay everything online" but after reading your point about how companies will probably increase prices if postage prices go up, I see exactly where you're going with this. It all falls back on the consumer.

Matt, I would love to see you trudging through below zero weather, in snow and ice, carrying a 40lb sack of mail on your back, in addition to a handheld scanner.... or through sweltering heat. Try that for a day or two and see if you still think $50k is too much.

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